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Wall Street surged on the last day of the year by the most since 1974, with the Standard & Poor's 500 Index registering a gain of 13.4% in 2012, as lawmakers in Washington moved closer to a resolution to the "fiscal cliff" negotiations.

The Dow Jones industrial average gained 166 points, or 1.28%, to end at 13,104. The Standard & Poor's 500 Index gained 24 points, or 1.69%, to finish at 1,426. The Nasdaq Composite Index gained 59 points, or 2%, to close at 3,020. The Dow rose 7.3% in 2012 and the Nasdaq climbed 15.9%.

Stocks oscillated yesterday on the headlines out of Washington, as both President Barack Obama and Republican Senate leader Mitch McConnell issued statements signalling a deal to avert the cliff was close.

Sources said an emerging deal, if adopted by Congress and President Obama, would raise $600 billion in revenue over the next 10 years by increasing tax rates for individuals making more than $400,000 and households earning above $450,000 annually.

Financials were the strongest gainer this year, led by Bank of America shares, which more than doubled. However, defensively oriented utilities ended the year lower, falling 2.9%.

Yesterday, Apple Inc shares rose 4.4%, helping lift the information technology sector and the Nasdaq. For the year, Apple gained 31.4%, ending with a market value of about $501.4 billion.

Facebook Inc. climbed 2.7% after Bank of Montreal raised its rating on the company to outperform from underperform.

Hewlett-Packard gained 4.2% for the biggest gain in the Dow. Caterpillar jumped 3.2%, while General Electric Co. advanced 2.7%.

Mr. O'Grady is is correct.The actions of these politicians is disturbing to say the least.

The US deficit is currently above $1 trillion pa which will continue to expand the US total debt at least $11 trillion over 10 years without some radical changes in policy.

The interest the US government pay on their debt is currently $265 billion pa ( $2.65 trillion over 10 years) and growing. This interest rate assumes that the markets continue to buy US debt at low rates which may be optimistic as the total debt grows above 100% GDP

$60 billion pa is no more than a gesture that kicks the problem down the road. It's a face saving agreement between politicians with vastly opposing beliefs.

No US politician, in office today, is ever likely to raise taxes ENOUGH to cover the costs of running the country and yet satisfy the opposing demands of their supporters and to continue to be the most powerful nation on earth.

The question is "can the most powerful nation on earth be up to it's neck in debt".